Cintas Increases Fiscal Q2 Revenue

Top 40 distributor Cintas (asi/162167) has reported that revenue for its fiscal second quarter ended Nov. 30 was $1.3 billion, an increase of 6.4% from last year’s second quarter. The company reported organic growth of 5.7%, adjusted for its merger in August with uniform rental company G&K Services, Inc. (asi/199845) and for fluctuations in foreign currency exchange rates. Organic growth in the Uniform Rental and Facility Services segment increased to 6.5%.

Gross margin increased to 44.1% from 43.3% in last year’s second quarter. Meanwhile, gross margin in the Uniform Rental and Facility Services segment grew to 44.7%, an increase of 80 basis points, and improved to 46.1% in the First Aid and Safety segment as a result of the acquisition of ZEE Medical in fiscal 2016.

“This is our 13th consecutive quarter of year-over-year gross margin improvement,” said Chairman and CEO Scott D. Farmer in a statement. “This, along with our industry-leading organic sales growth, is a reflection of the significant opportunities that exist for us and of the great execution of our employees, whom we call partners.”

Operating income was $203 million for the quarter, an increase of 1.3% from the same quarter last fiscal year. Net income from continuing operations was $123 million compared to $115 million last year, an increase of 6.9%, while EPS from continuing operations were $1.13, which includes a negative impact of 2 cents from expenses incurred during the merger with G&K Services. This is a 9.7% increase from $1.03 in the same quarter last year.

Operating income margin was 15.6%, compared to 16.4% last year, and includes $3.3 million, or .3% of second-quarter revenue, of expenses related to the acquisition of G&K Services.

The company saw 7.2% growth in its Uniform Rental and Facility Services segment, and 3.5% growth in its Other segment. The company did not break out promotional product revenue numbers, as is customary.

In an earnings call with analysts, CFO Mike Hansen declined to comment extensively on the company’s merger of G&K Services, other than to state that the move was approved by shareholders in November, and they expect the transaction to be finalized no later than the second calendar quarter of 2017. At the time of the announcement in August, Cintas said it expected between $130 million and $140 million in additional synergies with G&K.

Farmer stated that the company has updated its annual guidance and expects fiscal 2017 revenue to be between $5.18 billion and $5.225 billion, and fiscal 2017 EPS from continuing operations to be between $4.57 and $4.65. “Our solid second-quarter results, along with our updated guidance, position us to achieve record revenue and to grow our EPS [by] double digits for a seventh consecutive year,” he said.

Cintas ranks ninth on Counselor’s list of Top 40 distributors, with estimated 2015 revenue of $158.5 million.